Abstract:
The objective of this study is to investigate relationship between organizational structure, innovation and performance in Micro, Small,
and Medium Enterprises (MSMEs), with a particular focus on the mediating role of innovation. The research provides a novel lens
by examining how distinct dimensions of organizational structure—formalization, flexibility, centralization, complexity, and
specialization—interact with stages of innovation to influence multidimensional performance outcomes. This research explores how
structural design aligns with environmental contingencies and drives innovation as a dynamic capability in MSMEs. The integration
of these theories enables a nuanced understanding of organizational adaptability and performance within resource-constrained
settings.The methodology adopted for this research comprises employing a quantitative cross-sectional design, data from 400 MSMEs
was analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The findings reveal that innovation
significantly mediates the relationship between organizational structure and performance. Key structural dimensions such as flexibility
and complexity demonstrate a pronounced impact on adaptive capacity and strategic agility in MSMEs. By integrating structural and
innovation paradigms, this study provides actionable insights for policymakers and MSMEs leaders who aim to enhance competitiveness
and sustainability in a rapidly evolving business landscape. This research adopts a holistic approach by considering the interactive effects
of structural dimensions and staged innovation processes on MSMEs performance. This comprehensive perspective addresses critical
gaps in understanding how structural design facilitates continuous innovation and sustainable performance.
